A financial statement is also referred to as the annual report. This report presents the financial status of the company during the period of obstruction certain financial, which typically includes one full year. This report contains detailed graphs and data. For the layman, especially who lack the knowledge and background experience to read the annual financial statements, this report also relatively difficult to read and understand. The information presented in this report should reflect the fact and figures and graphs should show an accurate picture regarding the company’s financial status.
The steps :
1 . Read them carefully as possible the first few pages that exist in the financial statements. There are several pages of the CEO of the company that will discuss the major financial issues facing the company and may also give a positive response on the matter. CEO may remind the reader about the company ‘s mission statement, purpose and dedication to the customer as well as the states of all the positive things about the company and only mention the bad news.
2 . Read all parts of the page that contains the report after the CEO statement that greets the customers. This information typically includes the promotion of new products and services and to remind customers that the company is always working with them.
3 . Observe the graphs and charts that show the company’s financial status. Many of the charts are intended to be read by investors and shareholders not customers who want to learn more about the company. To be able to understand the financial statements of the company, try to find terms like ” asset ” and ” debt “, ” net worth ” ,” long-term assets and short-term ” and ” income statement “.
4 . See below section to determine what assets are owned by the company.
Under the Debt section, you can find the company assumed liabilities. Reduce overall debt of the amount of total assets in order to know whether the company is in a state of good or bad. If obligations or debt held more than the number of assets, it can be concluded that the company has more debt than assets. The results of this reduction is also called net worth.
5 . Analysis of short-term assets and long-term company. Long-term assets are thinner likely to fluctuate rather than short-term assets. Determine how much you can get from the company’s short-term assets and long-term.
6 . Add all of the assets of the company and for the amount of the total debt amount.
It will show the financial status of the company in terms of profits. For a healthy company, that number should double the amount of debt the company.
7 . Observe the income statement to determine how the company spends money owned. It will show where the company’s capital is spent and for what purpose the amount spent. For those who invest in the company, the income statement will provide information about the details of corporate spending.